Up-selling is a cornerstone practice of most catalog and e-commerce merchants. In many instances, especially low margin industries, the art of up-selling may comprise most of the profit made by a merchant. During the ordering process online merchants have traditionally sought to up-sell products to the customer on a range of metrics. These include, but are not limited to, product preferences the customer has indicated, similar products to the items already in customer's order, products other customers have historically added with the same order, and products with the highest gross margin.
To date, merchants have not considered all of the packaging and shipping ramifications of which particular products or SKU's they up-sell or down-sell and how. Specifically, at any given point in time, a merchant has a defined, limited set of boxes the merchant can employ to package and ship a customer's order. Up-selling certain products with certain dimensions and weights often requires a packaging reconfiguration. This occurs, for example, where the additional product does not fit in the optimal box for the original order. Hence, up-selling different products usually results in different optimal packaging reconfigurations. For example, instead of using BOX A with a certain dimension that packages the existing order optimally, merchant may now have to use BOX D with a certain larger dimension to package the order optimally. Each reconfiguration usually has a different net packaging and shipping cost. All other costs and preferences being equal (which they obviously are not), it will be preferable to up-sell certain SKU's more than others and relatedly, and perhaps to incentivize (by discounts or otherwise), certain SKU's more than others.
Indeed, to optimally rank which products to up-sell and how, a merchant must simulate how each order must be re-packed if up-selling any particular product and then calculate the additional total packaging and shipping costs. The economic consequences can be significant. Consider, for example, a merchant who tries to up-sell a certain product because it has a relatively high gross margin. And yet, given the customer's existing order, the size of the new product and available box sizes, the product addition requires merchant to now ship the order in 2 boxes, resulting in a net loss.
The shipping ramifications of up-selling are even more profound for merchants who use carriers with rate structures based on dimensional weight. These rate structures generally price the cost of shipment based on weight. Each pound costs more to ship. When a package crosses a certain dimensional threshold, however, the carrier assigns it an adjusted “dimensional” weight based on a pre-determined formula. Once crossing the threshold, the bigger the package, the higher the adjusted, dimensional weight. The carrier then charges the merchant the HIGHER of the dimensional weight or the actual weight.
Under a dimensional weight rate structure, a customer's order may already be “dimmed” (i.e., the adjusted weight, because of the large dimension, is greater than the actual weight). In such instances, merchant can up-sell certain SKU's with certain weights that fit into the optimal box already selected without any additional shipping costs. For example, a customer package may actually weigh 20 pounds but be sufficiently large to have a dimensional weight of 30 pounds which the carrier will charge merchant to ship the product. Here, any SKU's having a weight of 10 pounds or less which fit in the original optimal box housing customer's order will not cost the merchant any additional shipping fee from the carrier. Only by simulating how the new order (with the item being upsold) will be packed and examining the new packaging and shipping fees can the merchant optimally determine what and how to up-sell.